Correlation Between Verizon Communications and Electrica
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Electrica at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Verizon Communications and Electrica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Electrica SA, you can compare the effects of market volatilities on Verizon Communications and Electrica and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Verizon Communications with a short position of Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Electrica.
Diversification Opportunities for Verizon Communications and Electrica
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Verizon and Electrica is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Electrica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrica SA and Verizon Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Verizon Communications are associated (or correlated) with Electrica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrica SA has no effect on the direction of Verizon Communications i.e., Verizon Communications and Electrica go up and down completely randomly.
Pair Corralation between Verizon Communications and Electrica
Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.49 times less return on investment than Electrica. In addition to that, Verizon Communications is 1.11 times more volatile than Electrica SA. It trades about 0.04 of its total potential returns per unit of risk. Electrica SA is currently generating about 0.07 per unit of volatility. If you would invest 1,170 in Electrica SA on September 5, 2024 and sell it today you would earn a total of 130.00 from holding Electrica SA or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Verizon Communications vs. Electrica SA
Performance |
| Timeline |
| Verizon Communications |
| Electrica SA |
Verizon Communications and Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Electrica
The main advantage of trading using opposite Verizon Communications and Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Electrica can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Electrica will offset losses from the drop in Electrica's long position.| Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Hyundai Motor | Verizon Communications vs. Toyota Motor Corp |
| Electrica vs. Cairo Communication SpA | Electrica vs. Jupiter Fund Management | Electrica vs. Liontrust Asset Management | Electrica vs. Verizon Communications |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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